Seoul shares fell for the first session in three on Tuesday, as recent gainers including Samsung Electronics declined on concerns about the impact of higher oil prices on global consumer demand and their operating costs.
Wariness over rising interest rates in the key US market also added to the downcast mood ahead of major US economic data this week such as retail sales due out overnight.
Shares in KT&G Corp dropped after a South Korean court dealt a setback to US investors including Carl Icahn who are in the midst of a take-over battle with the country's biggest tobacco maker. Institutional investors were heavy sellers, unloading a net 270.6 billion won ($276 million) in shares.
The benchmark Korea Composite Stock Price Index (KOSPI) fell 0.9 percent to end at 1,326.30, after earlier falling as much as 1.6 percent.
Samsung Electronics Co Ltd, the world's biggest maker of memory chips, fell 1.27 percent to 624,000 won after gaining 2.8 percent over the past two sessions.
Concerns over expected poor earnings at major tech companies due to lower NAND memory chip prices and cut-throat competition at the display sector have hit the sector recently.
Flat panel maker LG.Philips LCD Co Ltd fell 2.74 percent to 42,550 won, while chip maker Hynix Semiconductor Inc lost 2.41 percent to 28,350 won.
A legal showdown over computer memory chips kicks off this week as Rambus Inc seeks to prove that Hynix ignored its patents and should pay hundreds of millions of dollars in damages.
Steel maker POSCO Co Ltd fell 2.48 percent to 236,000 won, retreating from a record 247,500 won hit in the prior session.
Shares in shipping firms fell, with Hyundai Merchant Marine Co Ltd down 4.78 percent to 13,950 won.
KT&G fell 3.7 percent to 54,700 won after a South Korean court rejected on Tuesday a legal attempt by an Icahn group to halt an election to select new board members at the tobacco firm's shareholder meeting on Friday.
Trade volume reached 347.5 million shares worth 3.2 trillion won as of 0650 GMT, compared to 317.9 million shares worth 3.3 trillion won on Monday. Decliners outnumbered gainers by 445 to 276 with 91 titles ending flat.
Foreign investors sold a net 187.1 billion won in shares on the main bourse, but retail investors bought a net 113.7 billion won.
The June KOSPI 200 futures index fell 2.70 points to 170.70, while the underlying KOSPI 200 spot index fell 1.72 points to 171.10.
South Korea's junior and tech heavy Kosdaq market lost 0.78 percent to finish at 667.06.